NABE Survey: Economists Don’t Expect Fed To Slow Bond Buying in Sept.

Most economists say the Federal Reserve won’t begin scaling back its bond-buying program until later in the fall or early next year, according to a National Association for Business Economics survey released Monday.

The economists appear to be more cautious in their outlook than Wall Street banks and even some Fed officials that have looked to the central bank’s September 17-18 meeting as a point to begin easing the pace of bond purchases, currently at $85 billion a month.

Only 10% of 220 economists polled expect the wind down to start before the end of September. The survey found 39% expect the first tapering of purchases in the final three months of 2013 with the remainder saying the Fed will hold off at least until 2014.

The response is surprising, said Jay Bryson, global economist at Wells Fargo Securities and one of the survey’s authors. He said it’s possible that some economists anticipate the Fed will announce its intention next month but not actually reduce the level of purchases until the fourth quarter. Economists were asked which quarter the Fed likely to begin winding down its asset purchase program.

The survey was taken between July 18 and August 5, shortly after interest rates jumped in the wake of Fed Chairman Ben Bernanke announcing a pullback could come later this year. That may have weighed on economists’ minds. In mid-July, Mr. Bernanke told lawmakers that recent rise in interest rates is “unwelcome”.

The economists gave the Fed high marks for its handling of the economy in recent years, with 73% calling the series of bond buying programs “a success.” The programs were designed to stimulate the economy by pushing down interest rates and therefore incentivizing investment.

“We haven’t seen any signs of inflation,” Mr. Bryson said. “Given that the economy continues to expand, I think that’s why three-quarters say bond buying has been a success so far.”

In comparison, only about a third of economists approve of current fiscal policy. Most said long-term deficits present a bigger challenge than near-term shortfalls, but they were divided over how to address the issue. The largest share, 39%, said deficit should be reduced through a mix of spending restraint and tax increases.

The survey found 68% of economists say uncertainly over the country’s current fiscal policy is holding back the economy. While high, the figure is down 11 points from the association’s March survey.

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